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Industrial Economics lab

QUES 1. WHAT IS ECONOMICS? EXPLAIN DIFFERENCE BETWEEN MACRO AND MICRO ECONOMICS?

Economics is the study of the production and consumption of goods and the transfer of wealth to produce and obtain those goods. Economics explains how people interact within markets to get what they want or accomplish certain goals. Since economics is a driving force of human interaction, studying it often reveals why people and governments behave in particular ways. There are two main types of economics: macroeconomics and

microeconomics. Microeconomics focuses on the actions of individuals and industries, like the dynamics between buyers and sellers, borrowers and lenders. Macroeconomics, on the other hand, takes a much broader view by analyzing the economic activity of an entire country or the international marketplace. A study of economics can describe all aspects of a countrys economy, such as how a country uses its resources, how much time laborers devote to work and leisure, the outcome of investing in industries or financial products, the effect of taxes on a population, and why businesses succeed or fail. Adam Smith, known as the Father of Economics, established the first modern economic theory, called the Classical School, in 1776. Smith believed that people who acted in their own self-interest produced goods and wealth that benefited all of society.

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Industrial Economics lab

Microeconomics: Microeconomics deals with "smaller" issues - consumer behavior, market behavior, costs of a business, competition among firms, and imperfections in markets (called market failure) and how we can respond to such failures. It also discusses particular markets, like the labor market, and issues such as the distribution on income and wealth in an economy, as well as public policies such as environmental concerns, poverty, and corporate mergers.

Macroeconomics: Macroeconomics deals with "larger" issues, such as inflation, unemployment, economic growth, and the measurement of these topics. It then discusses alternative views on how the economy operates, and what policies are best suited for different

economic circumstances.

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Industrial Economics lab

QUES 2. WHAT ARE THE GOALS OF ECONOMY? 1. Full Employment: Full employment is achieved when all available resources (labor, capital, land, and entrepreneurship) are used to produce goods and services. This goal is commonly indicated by the employment of labor resources (measured by the unemployment rate). However, all resources in the economy--labor, capital, land, and entrepreneurship--are important to this goal. The economy benefits from full employment because resources produce the goods that satisfy the wants and needs that lessen the scarcity problem. If the resources are not employed, then they are not producing and satisfaction is not achieved. 2. Stable Prices: Stability is achieved by avoiding or limiting fluctuations in production, employment, and prices. Stability seeks to avoid the recessionary declines and inflationary expansions of business cycles. This goal is indicated by month-to-month and year-to-year changes in various economic measures, such as the inflation rate, the unemployment rate, and the growth rate of production. If these remain unchanged, then stability is at hand. Maintaining stability is beneficial because it means uncertainty and disruptions in the economy are avoided. It means consumers and businesses can safely pursue long-term consumption and production plans. Policy makers are usually most concerned with price stability and the inflation rate. 3. Economic Growth: Economic growth is achieved by increasing the economy's ability to produce goods and services. This goal is best indicated by measuring the growth rate of production. If the economy produces more goods this year than last, then it is growing. Economic growth is also indicated by increases in the quantities of the resources--labor, capital, land, and entrepreneurship--used to produce goods.

4. Efficiency: Efficiency is achieved when society is able to get the greatest amount of satisfaction from available resources. With efficiency, society cannot change the way resources are used in any way that would increase the total amount of satisfaction obtained by society. The pervasive scarcity problem is best addressed when limited resources are used to satisfy as many wants and needs as possible.

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Industrial Economics lab

While efficiency is indicated by equality between demand price and supply for a given market, there are no clear-cut comprehensive indicators for attaining this efficiency goal. While it is possible, in theory, to pinpoint what is needed for efficiency, the complexity of the economy makes the task difficult to accomplish in practice. 5. Balance-to-Payment Equilibrium: Equity is achieved when income and wealth are fairly distributed within a society. Almost everyone wants a fair distribution. However, what constitutes a fair and equitable distribution is debatable. Some might contend that equity is achieved when everyone has the same income and wealth. Others contend that equity results when people receive income and wealth based on the value of their production. Still others argue that equity is achieved when each has only the income and wealth that they need. Equity means income and wealth are distributed according to a standard of fairness. But what is the fairness standard? It could be equality. Or it could be the productive value of resources. Or it could be need. Standards for equity moves into the realm of normative economics.

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Industrial Economics lab

QUES 3. STATE THE SCOPE OF ECONOMICS. Scope means the sphere of study. We have to consider what economics studies and what lies beyond it. The scope of economics will be brought out by discussing the following. a) Subject matter of economics. b) Economics is a social science c) Whether Economics is a science or an art? d) If Economics is science, whether it is positive science or a normative science? a) Subject matter of economics: Economics studies mans life and work, not the whole of it, but only one aspect of it. It does not study how a person is born, how he grows up and dies, how human body is made up and functions, all these are concerned with biological sciences, Similarly Economics is also not concerned with how a person thinks and the human organizations being these are a matter of psychology and political science. Economics only tells us how a man utilizes his limited resources for the satisfaction of his unlimited wants, a man has limited amount of money and time, but his wants are unlimited. He must so spend the money and time he has that he derives maximum satisfaction. This is the subject matter of Economics. b) Economics is a social Science: In primitive society, the connection between wants efforts and satisfaction is close and direct. But in a modern Society things are not so simple and straight. Here man produces what he does not consume and consumes what he does not produce. When he produces more, he has to sell the excess quantity. Similarly he has to buy a product which is not produced by him. Thus the process of buying and selling which is called as Exchange comes in between wants efforts and satisfaction. c) Economics, a Science or an Art? Broadly different subjects can be classified as science subjects and Arts subjects, Science subjects groups includes physics, Chemistry, Biology etc while Arts group includes History, civics, sociology Languages etc. Whether Economics is a science or an art? Let us first understand what is terms science and arts really means

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Industrial Economics lab

d) Economics whether positive or normative science: A positive science explains ''why" and "wherefore" of things. i.e. causes and effects and normative science on the other hand rightness or wrongness of the things. In view of this, Economics is both a positive and. normative science. It not only tells us why certain things happen, it also says whether it is right or wrong the thing to happen. For example, in the world few people are very rich while the masses are very poor. Economics should and can explain not only the causes of this unequal distribution of wealth, but it should also say whether this is good or bad. It might well say that wealth ought to be fairly distributed. Further it should suggest the methods of doing it.

Institute of Technology and Management, Bhilwara

Industrial Economics lab

QUES 4. WHAT IS PHILOSOPHY OF INDIAN CONSTITUTION? EXPLAIN SALIENT FEATURES (OBJECTIVE) OF INDIAN CONSTITUTION? The Constitution of India was drafted by a galaxy of eminent people, the like of whom will not assemble again. They were not elected by the people directly but represented the will of the people better than any elected body could do. The Preamble they drafted was described Sir Ernst Barker as the most beautiful poem in the world. It enshrines what men everywhere have fought for but have rarely realized in full. It expressly declares the sovereignty of the PEOPLE OF INDIA when it ends with the ringing words: We the people of India hereby enact, adopt and give to ourselves this constitution. So note that Parliament is not sovereign nor is the Judiciary sovereign. The people are above all of them. Salient features are: 1. Preamble: The Preamble, the preface to the constitution, describes the source nature, ideology, goals and objectives of the constitution. It describes India as a sovereign socialist, secular, democratic republic and underlines the-national objective of social just: economic justice and political justice as well as fraternity. It emphasises the dignity of the individual and the unity and integrity of the nation. It declares that in India the people sovereign. 2. Written Constitution: There are two types of constitutions in the world. Most of the constitutions are written. The first modern written constitution was the American constitution. On the other hand, the British constitution is unwritten. It consists of customs and conventions which have grown over the years. In India, we have a written constitution. The framers of our constitution tried to put everything in black and white. 3. Longest Constitution: The Constitution of India is the longest one in the world. Originally it had 395 Articles and 8 schedules. During the period since 1950 a few Articles have been deleted, but many more have been added through amendments.

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Industrial Economics lab

4. Partly Rigid, Partly Flexible: Whether a constitution is rigid or flexible depends on the nature of amendment. If the constitutional laws and ordinary laws are amended separate ways, it is a rigid constitution. On the contrary, in a flexible constitution constitutional laws and ordinary laws are amended in the same way. 5. Parliamentary Democracy: In India, there is a parliamentary form of govern The majority party in the Lower House (Lok Sabah) forms government. The Council Ministers is responsible to the Lok Sabha. The Cabinet is the real executive head. In Presidential form of government, the President is the executive head. In India, the President is only the nominal head. 6. Role of Conventions: Though India has a very detailed constitution, there is some scope for conventions to influence its functioning. On some vital issues constitution is silent and one has to depend upon well-established parliament conventions on such occasions. 7. Federal Government with Unitary Bias: India is a federation, although word 'federation' does not find a place in the whole text of the Indian Constitution. The elements of federation are present in the Indian Constitution. It is a written and rigid constitution.

8. Fundamental Rights: The Fundamental Rights are guaranteed to the individuals by our constitution. These are enumerated in Pail III of the constitution. These rights are fundamental because they are basic to the moral and spiritual development of the individual and these rights cannot be easily abridged by the parliament.

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Industrial Economics lab

9. Directive Principles of State Policy: The Directive Principles of State Policy are enumerated in Part IV of the constitution. They are instructions or directives from the constitution to the state and the government. It is the duty of the government to implement them. 10. An Independent and Integrated Judiciary: An independent judiciary is a none of any federation. The judiciary in India is independent and impartial. It is an integrated judiciary with the Supreme Court at the apex of the hierarchy. The High Courts stand in its middle, and the lower courts are located at its bottom. 11. Universal Franchise: Article 326 of the Constitution of India provides universal adult suffrage. The voting age has now come down from 21 to 18. Anybody who has completed 18 years of age is eligible to vote in general elections. This is one of the most revolutionary aspects of Indian democracy. 12. Secularism: India is a secular state. Although the 42nd Amendment Act, inserted the word 'secular' in the Preamble to the constitution, India has been secularism since independence. 13. Single Citizenship: In the United States of America, there is double citizenship. An American is a citizen of America and at the same time he is also a citizen of the 50 States of America. In India, there is only single citizenship. An Indian is a citizen of India only. He is not a citizen of any Indian state. Single citizenship is meant to s national unity and national integration.

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Industrial Economics lab

14. Fundamental Duties: (1) To abide by the constitution and respect the ideals and institutions, the national flag and the national anthem; (2) To uphold and protect the sovereignty, unity and integrity of India; (3) To defend the country and render national service; (4) To protect and improve the natural environment; (5) To safeguard public property and to abjure violence. 15. Welfare State: Our constitution aims at building a Welfare State. It provides for development of weaker and depressed sections of the society. It underlines the need of improving the conditions of women, Scheduled Castes and Scheduled Tribes who have remained neglected for long. 16. Democratic System: Our constitution lays a lot of emphasis on democratic values, and a number of democratic institutions have been established to give shape to these values. The centre, states and local self-governing bodies follow democratic principles, and all elections from gram panchayat to parliament are democratically held. All persons of 18 years age and more, irrespective of their caste, religion and gender, are eligible to vote in elections, and the constitution has provided for reservations in elections for dalits and tribal's. No democracy can survive if citizens are not allowed fundamental rights. The Indian constitution has granted a number of valuable fundamental rights to the citizens.

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Industrial Economics lab

QUES 5. ANALISE THE BUDGET 2012 AND HOW IT WILL AFFECT THE INDIAN ECONOMY? Mar. 23 Ordinary Indian citizens have a lot of hope for the Budget 2012-13 in terms of more income tax freedom, more income tax deductions, and the documents potential to rein in inflation. Even while the average citizen is also interested in growth and industrial development, that last point, inflation, will definitely be of chief concern.The Union Budget has increased the tax exemption limit to Rs. 20,000 for general category males giving tax relief of Rs. 2,000 and Rs. 10,000 for females giving Rs. 1,000 for individuals with incomes up to Rs. 8 lakh. Furthermore, a Rs. 5,000 deduction will be allowed for preventive health check-up U/S 80D, but the same is within the total limit of Rs. 15,000, and the threshold limit of 80D now will be used for medical claim policy as well as for preventive health check-ups. So the individual having a medical claim policy equal to or above Rs. 15,000 is not going to have any benefit from this. Additionally, the Finance Minister has proposed a new scheme in the Union Budget called the Rajiv Gandhi Equity Savings Scheme which is aimed at promoting the flow of savings in financial instruments while also improving the depths of the domestic capital market. Now, individuals having income up to Rs. 10 lakh can buy stocks up to Rs. 50,000 with a lock-in period of three years and will get 50 percent of the investment under the scheme (i.e. up to Rs. 25,000). But the deduction into infrastructure bonds up to Rs.20,000 will no longer be there since this advantage was initially declared for the financial year 2010-11. This was extended to the financial year 2011-12, but will not be extended for the financial year 2012-13. As such, individuals need to invest double under the new scheme in order to get the same deduction that he/she was getting by investing in the infrastructure bonds.

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Industrial Economics lab

Operating expenses are also bound to go up more than the relief received under the new Budget since the service tax net has been widened to include almost all services comprising a huge chunk of the household consumption basket. Only 17 items, such as vital education, public transportation, and services meant for agriculture are exempt from this tax. The Union Budget has proposed increasing the service tax by 2.06 percent which will certainly increase the costs of telephones, coaching classes, eating out, gyms, cable TV, health care, life insurance, real estate/stock broker salons, air travel, courier and packaging services. The hike in excise duties and customs duties is going to expand our expenses as manufacturers are bound to pass these on to the consumer. Prices of jewelry are also set to rise as customs duties on gold and platinum have been hiked from 2 percent to 4 percent while the excise duty on gold has been increased from 1.5 percent to 3 percent.

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Industrial Economics lab

QUES 6. WHAT ARE ADVANTAGES AND DISADVANTAGES OF BUDGET 2012 ON INDIAN INDUSTRY? Fuel Prices: No direct price increase, but we can hear the government talking about increasing petrol prices in the coming days, murmurs of slowly decontrolling diesel prices are also getting stronger. Expect to see the diesel prices go up and the trend to continue in the coming years Excise Duty: The government has increased the excise duty on cars. Heres the impact on various Segments. Luxury Cars: This segment will see the highest increment in prices. CBUs costing more than 40,000 dollars will have to face a flat 15% hike in excise duty. Shouldnt impact the main stream buyer much. Cars over 4 meters: A 3% increase in the excise duty for cars falling out of the Small Car definition. These are cars more than 4 meters in length and powered by a motor bigger than 1.2 liters for petrol, and 1.5 liter for diesel driven cars. Expect the prices to increases Slightly. Small cars: Cars coming under the Small Car definition will also witness a 2% increase in excise duty. Again, expect the prices to go up, but not as much as in the upper segments. Hybrids and EVs: No change in tax structure for parts imported for the manufacture of such vehicles. All in all, we see driving and riding getting more expensive, not by a great margin though. No new sops for the industry, but the government have allocated good funds for Infrastructural development. If implemented properly, and its a big if, it may help the auto industry grow that minute bit. We dont see the auto industry reacting to this budget very positively.

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